Michigan Cannabis Supply and Demand Fluctuation Creates Potential Issue

The Cannabis Regulatory Agency (CRA) is seeking input on how to solve a potential surplus after the price of “flower” dropped 44% in the past year, going from $218/ounce in Summer 2021 to roughly $122/ounce in 2022. While the price drop is music to consumers’ ears, it could spell an issue for an industry that is still trying to contribute to economic growth and provide potential business opportunities for entrepreneurs.

The CRA offered the following questions which were addressed as it’s meeting on September 14: 

• Would you support a change in the law to place a moratorium on the issuance of grow licenses? If so, under what conditions? If so, for what period?
• Should the agency eliminate the excess grower license established in the administrative rules, as authorized by Sec. 8(2)(a) of the MRTMA [MCL 333.27958(2)(a)]?
• Should the agency promulgate a rule as authorized by Sec. 9(3)(d)(3) of the MRTMA [MCL 333.27959(3)(d)(3)] to authorize an individual to hold an interest in more than five marijuana growers or in more than one marijuana microbusiness after January 1, 2023

Mixed feelings from industry pundits

Some vendors are concerned with the price drop and oversupply, citing potential layoffs and closed doors at several companies. Others believe a moratorium would be just a measure of price control and would not really solve the issue.

A moratorium would really slow expansion in cities like Detroit that are just now starting to issue licenses for recreational use stores and grow operations.

Currently, 100 out of every 1,700 communities in Michigan have adult-use cannabis stores. This leads some to believe the oversupply is a temporary issue and once more of the market opens up, there will be more capacity for growers.

“There has been such a dramatic increase in active grower licenses over the past year, remarkable growth,” said Todd Tigges, leader of the national cannabis practice. “The Detroit market is still brand new to the adult-use sector, and there are a multitude of communities that have yet to welcome recreational use.  Once more markets get online, this surplus becomes a minor speedbump in the growth of an emerging industry.”